When New York City confirmed its first case of COVD-19 on March 1, 2020, few could have imagined the wider economic impact the virus would have to the city. By November 2020, it was estimated that 8,333 restaurants had closed their doors, causing over 11,000 hospitality workers to lose their jobs. For restaurants that did survive and workers who lost their jobs, third-party delivery services like Grubhub, Doordash, and Uber Eats were there to soften the blow.
Despite their dependence on third-party delivery services, restaurants and the New York City Council have taken a series of steps to clamp down on these organizations in a move that could imperil consumers, workers, and small restaurants.
It seems New York is biting the hand that fed it during the pandemic.
Recently, the New York City Council announced it would consider a package of bills that will impede how third-party delivery services operate. The first bill, Int.2311, would require “third-party food delivery services… share monthly information on customers.” A second bill, Int.2359, would prohibit “third-party food delivery services…from charging such establishments more than 15% per order for delivery and more than 5% per order for all other fees.” Last week, the council passed this bill, making New York the second city in the country, after San Francisco, to pass a cap on the amount third-party delivery companies can charge.
Advocates of these bills, including New York Mayor Bill DeBlasio, have long argued that third-party delivery services are “prohibitively expensive” for restaurants that operate on razor-thin margins. Others have criticized third-party delivery services for exploiting restaurants, framing the relationship “mom-and-pop eateries have with venture capital-backed food delivery platforms” as “David versus Goliath.” Aside from the fact David defeated Goliath, these critics ignore the reality that these bills will only harm consumers and the restaurants they are designed to protect.
On an elementary level, third-party delivery apps enabled more small restaurants to survive the pandemic. When Governor Andrew Cuomo issued a stay-at-home order on March 20, 2020, restaurants were prohibited from offering in-person dining. Yet, with third-party delivery services, many small restaurants could continue serving consumers when they didn’t have their in-house delivery network.
Had small restaurants not had access to third-party delivery services, many more restaurants would likely have been forced to close, and the big apple would have gotten much smaller.
Requiring third-party delivery companies to share data leave will likely create substantial data vulnerabilities. Smaller restaurants likely have few, if any, cybersecurity measures. This lack of cybersecurity measures ultimately means that smaller restaurants will be unable to appropriately protect consumer data from falling into the hands of cybercriminals. Moreover, these weak cybersecurity measures stand against the robust protections third-party delivery companies offer.
Capping the amount food delivery companies can charge for delivery could ultimately force them to reduce service, particularly those in rural communities. Unable to charge the total cost of delivering food, third-party delivery companies will likely reduce the area they serve and shift away from unprofitable rural communities. This will disproportionately harm those who live outside major metropolitan cities and drive down demand for small restaurants. This drop in demand and reduced service area ultimately defeats “the purpose of the legislation.”
Throughout the COVID-19 pandemic, third-party food delivery services have offered thousands of New York residents the opportunity to maintain an income. When the COVID-19 pandemic hit, New York City lost an estimated 1 million jobs. Despite these significant job losses, third-party food delivery services were able to provide income for an estimated 50,000 to 80,000 workers. Without the opportunity to deliver food, thousands more New Yorkers would likely have been plunged into poverty, and the economic consequences of the pandemic would have been more significant.
While third-party food delivery companies may be easy political foils because of their billion-dollar earnings, the New York City Council should remember that they provided a lifeline to thousands of restaurants and workers during the COVID-19 pandemic. Capping delivery fees and requiring third-party delivery services will only harm consumers and the restaurants these provisions are designed to protect.
Now that the NYC Council has approved this bill, for the sake of consumers and small businesses, the mayor should not sign it. New York is truly biting the hand that fed it during the pandemic.